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SMEs trading banks for fintechs, poll suggests

Fintech and other non-bank lenders are set to overtake banks as the preferred source of growth funds for Australian SMEs, the latest Scottish Pacific SME Growth Index suggest.

[Related: Let’s Talk… FintechFinTech Australia’s CEO steps down but will continue to help Aussie fintechs from Asia and Fintech Code of Conduct recommended by report into best-practice for SME lenders]

The twice-yearly poll was informed by interviews with more than 1250 SMEs with annual revenues of up to $5 million. Scottish Pacific found that between 2014 and 2018, the proportion of SMEs intending to use banks for funding dropped from 38% to 24%. Meanwhile, 22% of SMEs identified non-bank lenders as their preferred source of growth funds, up from 11% in 2014. In addition, it was revealed that amongst SMEs that have not used non-banking lending options in the past 12 months, 47.6% would be interested in using these options in the future.

Commenting on the findings, Peter Langham, CEO of Scottish Pacific said: “Alternative lending options, including debtor finance and P2P lending, offer SMEs the chance to fund growth without using property as security. Business owners need to know they have a credible choice when they are looking for funding.”

Fintech Australia Chair, Stuart Stoyan welcomed the latest SME Growth Index, explaining that it provides yet more evidence of the “extremely important role” fintech lenders are playing to help Australia’s 2.1 million SMEs grow.

“Fintech lending and finance firms are increasingly providing the capital that these businesses need to invest and grow, through a focus on innovation and customer needs,” he said.

“Fintech offerings include creating seamless online loan applications and software that analyses business financial data to deliver the best possible deal.

“Some are also applying innovative new finance business models, directly linking investors and borrowers, or helping businesses to unlock the value of their unpaid invoices. In doing this, fintechs are providing new options for businesses.”

Charlotte Petris, CEO of Timelio – a Peer-to-peer marketplace for invoice finance – said her company had seen a 300% growth in demand from SMEs for funding in the last 12 months, due to an increase in awareness of flexible funding alternatives. That support business growth plans. Similarly, Beau Bertoli, joint CEO of SME lender Prospa, said the SME growth index shows SMEs are increasingly aware that they “have a way to access finance if they want to”.

Meanwhile, Alistair Lamond, co-founder of cash flow advisers Skippr said the ability to use data to improve customer experience and manage risk is what sets fintechs apart from the banks. He added, “We have only scratched the surface in terms of capabilities. The true winners are building trust through continuous engagement tackling bigger problems than just lending.”

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James Harkness

James Harkness

James Harnkess previous editor at Dynamic Business

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